UK businesses losing £98.6bn to fraud every year
Annual losses from fraud and mistakes increase to 5.9% of expenditure, report finds
BRITISH businesses are losing an estimated £98.6bn to fraud and mistakes every year, according to research from accountancy firm PKF Littlejohn and the Centre for Counter Fraud Studies at the University of Portsmouth.
Losses increased in 2012/2013 compared to 2010/2011, up from 5.01% of annual expenditure to 5.9% – an increase of 17.8%, and 29% higher than for the period prior to the recession from 1997 to 2007, the report found.
The Financial Cost of Fraud 2015 report reviewed 382 loss measurement exercises published over the last 17 years, covering over £9.76tn expenditure.
It revealed that businesses around the world are losing around £2.78tn each year. Reducing this figure by 40% would free up more than £1.1tn – a sum greater than the GDP of 175 countries.
“Beating fraud is every company’s business. If a business was paying six per cent over the odds for its energy and utilities, or rental properties then management would be quick to act or shareholders and investors would want to know why. Fraud is the last great unreduced business cost,” said Jim Gee, head of forensic and counter fraud services for PKF Littlejohn and one of the report’s authors.
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So many businesses just assume that they have good systems and controls, while fraud is one reason for avoidable costs, there is also leakage through inefficiency and a lack of attention to detail. Internal audit is often seen as being applicable to public companies, but can provide an added value impartial to any organisation.